In a sense e-commerce development ran away with
itself in the late 1990s as companies rushed to establish industry standards.
Internet trading sites were offered to people and organizations that were not
comfortable working on the Internet, and it is no surprise that many such sites
have since closed down. Nevertheless, coffee companies worldwide have learned
the advantages of using computers to save costs and, possibly, give access to
new markets.
Growers and exporters looked to Internet trading to
gain better prices. The hope was that by eliminating the 'coyotes', or
middlemen, they would get better prices from the major roasters but it was
always doubtful this would happen for most of them. Following the marketing
principle that you can eliminate the middleman but not his function, eliminating
middlemen and the middle market for coffee might even have the opposite effect
on prices. Buying power in the import market continues to be hugely
concentrated. The mainstream coffee market accounts for close to 90% of all
coffee business, and the specialty or gourmet market by itself is still unable
to drive prices. But origin will always try to gain ground and exporters may
eventually find themselves on a more equal footing with the middlemen they are
hoping e-commerce may eliminate. However, to date the signs are not
encouraging.
Importers saw the opportunity differently although,
like exporters, they too hoped to save on back-office costs. Unlike exporters,
who see coffee trading only once, that is from source to importer or roaster,
importers also hoped the Internet would stimulate renewed interest in the second
hand market. They imagined a cash market that operates with Internet efficiency
and speed, where parcels of coffee might trade two, three, or more times between
coffee merchants before finding a final buyer.
Such secondary or second hand trades would be used by
merchants to offset differential and market risk, and would link the speculative
activity of the futures markets to the fundamental realities of the cash market.
But this has not happened - as of end 2010 there were still no electronic market
places that actively traded green coffee…
Large companies, including roasters, are also
looking to trim costs and back-office paper work. But, perhaps more importantly,
they hoped the Internet might bring coffee market transparency and better
purchase audit trails.